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Levine v. Washington National Insurance Co.

United States District Court, M.D. Pennsylvania

March 16, 2018

CORPORAL ISAAC D. LEVINE, Plaintiff,
v.
WASHINGTON NATIONAL INSURANCE COMPANY, Defendant.

          MEMORANDUM

          JOSEPH F. SAPORITO, JR. United States Magistrate Judge.

         This is an action by a policyholder against his insurer for breach of contract and for the statutory tort of bad faith. The plaintiff, Corporal Isaac D. Levine, is a police officer with the Swatara Township Police Department. Corporal Levine purchased an accidental death and dismemberment policy with an individual short-term disability benefit from the defendant, Washington National Insurance Company (“Washington National”). In December 2012, Corporal Levine suffered a cervical spinal injury while at work-when lifting a heavy patrol bag, he reportedly felt a pop or pull in his back and neck area, followed by immediate and severe pain in his shoulder and upper back area. In February 2013, Levine submitted a written claim form to Washington National for payment of benefits under the accident insurance policy. Washington National denied coverage under the policy on the ground that the incident did not constitute a covered accident, as it was not a sudden, unexpected, and unforeseen event.

         On November 9, 2015, Levine filed this lawsuit in the Court of Common Pleas for Dauphin County, Pennsylvania. On December 3, 2015, the defendant removed the action to federal court on the basis of diversity jurisdiction.[1]

         On March 22, 2017, Washington National filed its motion for summary judgment, together with a statement of material facts and a brief in support. (Doc. 43; Doc. 44; Doc. 45). On April 11, 2017, Corporal Levine filed his response to the motion, together with a counter-statement of material facts and a brief in opposition to summary judgment. (Doc. 47: Doc. 48; Doc. 49). On April 25, 2017, Washington National filed its reply brief. (Doc. 51). The matter is now ripe for disposition.

         I. Legal Standard

         Under Rule 56 of the Federal Rules of Civil Procedure, summary judgment should be granted only if “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A fact is “material” only if it might affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute of material fact is “genuine” only if the evidence “is such that a reasonable jury could return a verdict for the non-moving party.” Anderson, 477 U.S. at 248. In deciding a summary judgment motion, all inferences “should be drawn in the light most favorable to the non-moving party, and where the non-moving party's evidence contradicts the movant's, then the non-movant's must be taken as true.” Pastore v. Bell Tel. Co. of Pa., 24 F.3d 508, 512 (3d Cir. 1994).

         The party seeking summary judgment “bears the initial responsibility of informing the district court of the basis for its motion, ” and demonstrating the absence of a genuine dispute of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the movant makes such a showing, the non-movant must set forth specific facts, supported by the record, demonstrating that “the evidence presents a sufficient disagreement to require submission to the jury.” Anderson, 477 U.S. at 251-52.

         In evaluating a motion for summary judgment, the Court must first determine if the moving party has made a prima facie showing that it is entitled to summary judgment. See Fed. R. Civ. P. 56(a); Celotex, 477 U.S. at 331. Only once that prima facie showing has been made does the burden shift to the nonmoving party to demonstrate the existence of a genuine dispute of material fact. See Fed. R. Civ. P. 56(a); Celotex, 477 U.S. at 331.

         Both parties may cite to “particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for the purposes of the motion only), admissions, interrogatory answers or other materials.” Fed.R.Civ.P. 56(c)(1)(A). “An affidavit or declaration used to support or oppose a motion must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant or declarant is competent to testify on the matters stated.” Fed.R.Civ.P. 56(c)(4). “Although evidence may be considered in a form which is inadmissible at trial, the content of the evidence must be capable of admission at trial.” Bender v. Norfolk S. Corp., 994 F.Supp.2d 593, 599 (M.D. Pa. 2014); see also Pamintuan v. Nanticoke Mem'l Hosp., 192 F.3d 378, 387 n.13 (3d Cir. 1999) (noting that it is not proper, on summary judgment, to consider evidence that is not admissible at trial).

         II. Material Facts

         On or about March 6, 2009, Corporal Levine applied for an accident insurance policy with Washington National. At the time, he was employed as a police officer with the Swatara Township Police Department. He was later promoted to police corporal.

         On May 1, 2009, Washington National issued “Accidental Death and Dismemberment Policy with Disability Individual” number XXXXXXX882 (the “Policy”) to Levine in accordance with his application. The Policy pays certain cash benefits directly to the policyholder in the event of a Covered Accident. For example, the Policy pays up to $800 for a ruptured disc, up to $100 for physician's visits, and up to $400 for physical therapy. The Policy also provides short term disability benefits, but the parties dispute the total amount of coverage afforded under this provision. On or about January 4, 2011, Corporal Levine submitted a second application on the Policy, adding his wife as an insured as well.

         On December 21, 2012, Corporal Levine claims to have accidentally injured himself “while lifting a heavy patrol bag and feeling a pop or pull in his back and neck area accompanied by immediate and severe pain in his shoulder and upper back area.”

         On February 15, 2013, Levine submitted a completed Accidental Injury / Sickness Claim Form, together with medical treatment records and a physician statement. This first claim submission reported December 21, 2012, as the “date of incident, ” and reflected the receipt of medical treatment for a strain or sprain of the plaintiff's cervical spine and trapezius areas on three separate dates: December 24, 2012;[2] January 2, 2013; and January 7, 2013. The submitted materials indicate that Corporal Levine was prescribed non-steroidal anti-inflammatory medication and pain medication, an MRI was conducted, and he was referred to orthopedics and to physical therapy with a “no patrol duties” work restriction. On or about February 23, 2013, Washington National sent Levine an Explanation of Benefits denying his claim on the stated ground that the “service/treatment [are] not covered by your policy, ” based on a finding that there was “no accident” and explaining that “[a]n Accident means a sudden, unexpected, and unforeseen event.”[3]

         On March 1, 2013, Levine submitted a photocopy of the same completed Accidental Injury / Sickness Claim Form, together with an invoice for physical therapy services. The submitted materials indicate that Corporal Levine received 14 sessions of physical therapy between January 29 and February 27, 2013. On or about March 5, 2013, Washington National sent Levine an Explanation of Benefits denying his claim on the stated ground that there was “no accident” and explaining that “[a]n Accident means a sudden, unexpected, and unforeseen event.”

         On March 15, 2013, Levine submitted a physician statement from his orthopedic surgeon. The submitted materials reflected that Corporal Levine received treatment for neck pain on four separate dates: January 9, 2013; January 25, 2013; February 15, 2013; and March 15, 2013. The documentation further indicates that Corporal Levine received an epidural injection in the course of this treatment. On or about March 22, 2013, Washington National sent Levine an Explanation of Benefits denying his claim on the stated ground that the “service/treatment [are] not covered by your policy, ” based on a finding that there was “no accident” and explaining that “[a]n Accident means a sudden, unexpected, and unforeseen event.”

         Between January 4 and April 21, 2013, Corporal Levine worked “light duty” at the police department. While on light duty, Levine was able to review paperwork, conduct document research, make and take phone calls, hold pre-tour briefings, attend departmental meetings, and interact with people who came into the police department to file police reports, but he was unable to perform any patrol duties. He was not permitted to drive, to take statements from informants or suspects, to advise individuals of rights and processes, to mediate disputes, to attend court, to collect evidence and substances from the street, or to be placed into antagonistic environments because he could not wear a uniform or defend himself. While on light duty, Corporal Levine was not paid any less for his work time, but he was unable to earn overtime pay for court hearings.

         Between April 22, 2013, and September 29, 2013, Corporal Levine was out of work completely on doctor's orders, and during this time period he received temporary total disability workers compensation benefits. On July 8, 2013, Levine underwent disc replacement surgery.

         On September 30, 2013, Corporal Levine returned to work with a “light duty” restriction. On December 17, 2013, Levine was cleared to return to work on full-duty status, which he did on December 20, 2013.

         On November 20, 2013, Washington National received an “appeal of claim denial” letter from counsel representing Corporal Levine. On January 28, 2014, Washington National responded to Levine's attorney, upholding its denial of benefits.

         On November 9, 2015, Corporal Levine filed this lawsuit, seeking the following policy benefits, plus punitive damages, attorney fees, and interest: (a) $800 for suffering a ruptured disc; (b) $100 for physician visits; (c) $400 for physical therapy visits; and (d) 1/30th of his monthly pay or $208.36 per day for 349 days of disability, totaling $72, 717.64.

         III. Discussion

         In his complaint, Corporal Levine has asserted claims against Washington National for breach of contract and for the statutory tort of bad faith, actionable under 42 Pa. Cons. Stat. Ann. § 8371.[4] Washington National has moved for partial summary judgment. With respect to the bad faith claim, Washington National contends it is entitled to summary judgment because: (1) Levine's bad faith claim is barred by the applicable statute of limitations; (2) Washington National had reasonable basis for the denial of coverage-the notation in his original physician statement suggesting that he received medical treatment on December 4, 2012, more than two weeks before the incident in which Levine claimed to have been injured; and (3) Washington National had an additional, independent reasonable basis for denial of coverage-that Levine was not in fact totally disabled. With respect to the breach of contract claim, Washington National contends that it is entitled to summary judgment because: (1) Levine failed to give Washington National notice of his claim or proof of loss as required by the Policy; (2) there is no evidence that Levine was totally disabled within 90 days after the alleged accidental injury as required by the Policy; and (3) Levine's claim for disability benefits is limited to payment of $2, 000 per month for a maximum of twelve months. Washington National has not moved for summary judgment with respect to Levine's claims for ruptured disc, physician's visit, and physical therapy benefits under the Policy.

         A. Statutory Bad Faith Claim

         In Count II of the complaint, Corporal Levine has asserted a statutory bad faith claim, brought pursuant to 42 Pa. Cons. Stat. Ann. § 8371. This statute provides that:

In an action arising under an insurance policy, if the court finds that the insurer has acted in bad faith toward the insured, the court may take all of the following actions:
(1) Award interest on the amount of the claim from the date the claim was made by the insured in an amount equal to the prime rate of interest plus 3%.
(2) Award punitive damages against the insurer.
(3) Assess court costs and attorney fees against the insurer.

42 Pa. Cons. Stat. Ann. § 8371. Under Pennsylvania law,

the term bad faith includes any frivolous or unfounded refusal to pay proceeds of a policy. For purposes of an action against an insurer for failure to pay a claim, such conduct imports a dishonest purpose and means a breach of a known duty (i.e., good faith and fair dealing), through some motive of self-interest or ill will; mere negligence or bad judgment is not bad faith. Therefore, in order to recover under a bad faith claim, a plaintiff must show (1) that the defendant did not have a reasonable basis for denying benefits under the poicy; and (2) that the defendant knew or recklessly disregarded its lack of reasonable basis in denying the claim.

Keefe v. Prudential Prop. & Cas. Ins. Co., 203 F.3d 218, 225 (3d Cir. 2000) (citations and internal quotation marks omitted). “These two elements- absence of a reasonable basis for denying a claim under the policy and knowledge or reckless disregard of the lack of such reasonable basis-must be proven by clear and convincing evidence.” Cozzone v. AXA Equitable Life Ins. Soc. of the U.S., 858 F.Supp.2d 452, 458 (M.D. Pa. 2012) (citing Klinger v. State Farm Mut. Auto. Ins. Co., 115 F.3d 230, 233 (3d Cir. 1997)).

         Section 8371 does not itself include a limitations period, and the Supreme Court of Pennsylvania has not yet addressed the issue, but Pennsylvania's federal courts have previously held that the state's two-year tort statute of limitations applies to a bad faith action brought under 42 Pa. Cons. Stat. Ann. § 8371. Skirica v. Nationwide Ins. Co., 416 F.3d 214, 223-24 (3d Cir. 2005); Haugh v. Allstate Ins. Co., 322 F.3d 227, 236 (3d Cir. 2003); Cozzone, 858 F.Supp.2d at 458; CRS Auto Parts, Inc. v. Nat'l Grange Mut. Ins. Co., 645 F.Supp.2d 354, 364-65 (E.D. Pa. 2009); McCullough v. Nw. Mut. Life Ins. Co., No. 2:05cv0105, 2007 WL 4440954, at *3-*4 (W.D. Pa. Oct. 24, 2007). Moreover, these precedents hold that the limitations period for a § 8371 claim commences when the insurer first provides definite notice of its denial of coverage. See Sikirica, 416 F.3d at 224; Cozzone, 858 F.Supp.2d at 458; CRS Auto Parts, 645 F.Supp.2d at 365; McCullough, 2007 WL 4440954, at *3.

“For purposes of applying Section 8371, one must look to the date on which the defendant insurance company first denied the insured's claim in bad faith.”. . . [C]ontinuing denials of coverage after the initial denial of coverage do not give rise to separate acts of bad faith. To that end, an insured “may not separate initial and continuing refusals to provide coverage into distinct acts of bad faith.” Thus, where an insurer clearly and unequivocally puts an insured on notice that he or she will not be covered under a particular policy for a particular occurrence, the statute of limitations begins to run and the insured cannot avoid the limitations period by asserting that a continuing refusal to cover was a separate act of bad faith.

CRS Auto Parts, 645 F.Supp.2d at 365 (quoting Adamski v. Allstate Ins. Co., 738 A.2d 1033, 1040, 1042 (Pa. Super. Ct. 1999)) (citations omitted).

         Here, Washington National's February 23, 2013, Explanation of Benefits unambiguously informed the plaintiff of its denial of coverage. The plaintiff's subsequent efforts to obtain clarification or reconsideration of this coverage denial by Washington National are immaterial; his right to institute and maintain suit based upon the insurer's “frivolous or unfounded” refusal to pay benefits under the Policy accrued upon receipt of Washington National's Explanation of Benefits dated February 23, 2013. See Cozzone, 858 F.Supp.2d at 458-59; McCullough, 2007 WL 4440954, at *4. While the precise date upon which he received notice is not clear, at the latest, Corporal Levine ...


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